Squeezing savings from the cloud

Determining whether cloud services will pay off is an extremely complicated process. Here's how to compute the ROI.

The Calculation

To try to figure out the ROI of any of its prospective cloud projects, Northern Kentucky starts with an ROI calculator and research from Gartner, adapting it for the university's own special needs.

For instance, Ferguson has strict privacy requirements since many cloud services used by the university handle students' personal identifying information, including Social Security numbers. NKU includes privacy in its ROI calculation by subtracting value when considering a vendor that doesn't seem to grasp the university's privacy requirements, he says.

When calculating ROI, the values assigned to various factors, such as privacy, will vary from organization to organization. One business might see security as the most important consideration, while another might place more weight on the speed at which you can add capacity, and others could deem liability to be the highest priority. "That question of value is complicated," says Marc Brien, vice president of research for Domicity, a consulting and IT analysis firm.

The value of redundancy is one factor that many organizations struggle with when transitioning to the cloud.

There are two types of organizations that don't build in redundancy when using cloud services, says Mark Eisenberg, who formerly worked on the Azure team at Microsoft and now is a director at IT consulting company Fino Consulting. The first are those that are simply unaware of the need for redundancy. They don't know, for instance, that when they move a workload to a cloud-based platform like Amazon Web Services, they must distribute that workload across data centers in multiple regions if they want to avoid the possibility of losing all of their data because of an outage in one particular area. AWS has been good about releasing white papers and other advice on how to properly do this, Eisenberg says.

In the second group are organizations that don't bother with redundancy because they make conscious business decisions not to shoulder the cost of building in redundancy. Such a decision might make sense if the systems running on the cloud aren't mission-critical. "It depends on what they stand to lose," Eisenberg says.

The cost of building in redundancy can be daunting. Take data storage. It costs twice as much to fully replicate data. But there are also architectural decisions to consider. Having two data stores separated by a long distance introduces latency when syncing the stores. For many applications, that latency might not matter. But for some types of applications it could create problems.

Cost is a factor for compute redundancy too. Businesses that can tolerate the delay involved with spinning up new cloud-based servers -- usually around five minutes -- can wait until a problem occurs before they fire up backup instances, Eisenberg says. Others may run half as many additional servers instead, because they can tolerate some latency with their apps better than they can handle a complete outage for a few minutes.